The best way to learn about the AdWords Performance Grader is to grade your AdWords account for free, but if you don't have an AdWords account, take a look at the sample AdWords report below (click on the AdWords report to enlarge). In this blog post I'd like to write a little about why we built the AdWords Performance Grader, how we decided on what key performance metrics to grade, and why I think the grader is so cool!

Why Did We Build the AdWords Performance Grader?

AdWords is very competitive and confusing, and marketers and small business owners we talk to generally want to know how they're doing compared to other AdWords advertisers, what's wrong with their accounts, what they can do to improve, and what kind of results they could expect to get if they were successful. In other words, they want an AdWords audit of their PPC accounts, plus help with improving their performance. But PPC audits are expensive and time-consuming.

So we set out to build a new AdWords tool that could do all this quickly, easily and without a high cost. The AdWords Performance Grader:

Is easy to use and understand

Provides the same kind of account analysis you'd expect from a consultant or agency

Offers actionable insights and competitive intelligence

Best of all, your AdWords performance report is instant and available for free.

Why Does the AdWords Performance Grader Compare You to Advertisers with Similar Budgets?

The AdWords Performance Grader grades your account against the thousands of other AdWords accounts we have graded in a similar spending range – for example, if your monthly spend range is $400 per month, then we’ll compare your account with other advertisers spending between $10 and $500 per month. Why? We believe it makes the most sense to compare your account performance with other advertisers like you, with similar advertising dollars at stake, even if they’re not in the exact same industry.

For example, suppose you're operating in a competitive AdWords keyword niche like "insurance", where there are big advertisers like GEICO spending over $10 million per month on AdWords, and smaller local insurance brokers spending as little as $10 per month. Even though the big and little advertisers are in the same industry, it’s not really fair to compare their performance. In this example, the big advertiser has a million times more money at stake and is undoubtedly spending millions on a team of search marketers and technology to get every possible advantage, whereas it’s not worth it to be spending that level of resources on an account with a $10/month budget. It's like boxing, where there are different "weight classes" for different classes of fighters – we’re bucketing advertisers into different categories according to their average monthly spending on AdWords.

How Did We Decide Which Key Metrics to Use in the Grader?

Different advertisers have different objectives: lead generation, online sales, “branding,” or some combination of the above. And search marketers can have different recipes for AdWords success, with different opinions on what the most important key performance metrics are. So how did we end up choosing the metrics that we picked?

We interviewed search marketers, advertisers and customers to get their opinions on this matter and we ended up choosing the metrics that align most closely with Google AdWords best practices – stuff that Google themselves say is important, including:

Quality Score

Usage of negative keywords

Impression share

Click-through rate

Long-tail keyword optimization

Account activity

Ad text optimization

Landing page optimization

We also make sure you're adhering to basic AdWords best practices like network targeting and enabling conversion tracking. View the example AdWords report for a description of the different metrics and why they matter.

How Is Your Grade Calculated?

For each category, we assign you a comparative grade. For example, in the Quality Score category, we calculate your account’s average Quality Score and then compare your score against other advertisers in your spending range. If you have the highest Quality Score in the group, you get 100%. A score of 51% means that you’ve beaten more than half of the other accounts in your spending range for that metric.

The overall account score is based on how you did in all of the different categories compared to other accounts in your spend range.

What Happens to Your Account Data?

We don't save your AdWords account credentials. Period.

In order to analyze your account performance, we download several AdWords reports. We store some aggregated statistics about your account (for example, your average Quality Score) in order to make the relative ranking accurate. This information is not shared, sold or used for any purpose other than for providing your relative score.

What's Next?

We think the AdWords Performance Grader has tremendous value for millions of SMB's to help them learn more about what’s happening in their AdWords accounts, and we have great hopes for making this tool even more helpful and insightful. We hope you’ll grade your AdWords Account. (We won't save your AdWords credentials, but you'll have access to your report for as long as you want it.) Tell us what you thought of your grade. Do you agree or disagree with the score? Write your thoughts in the comment fields below, or email me. (I’ll respond!).